White House Trying to Woo Small Businesses on Health Care Reform

July 27, 2009

By ABCNEWS.COM

With opponents of health care reform raising questions about what the impact might be of a federal mandate requiring businesses to cover their employees, the White House has started wielding a new study by the its own Council of Economic Advisers to make the case that small business owners and employees will benefit from health care reform.

"The vast majority of small businesses, they'll see their burdens absolutely lessened by the expansion of coverage," said Dr. Christina Romer, chair of the President’s Council of Economic Advisers and author of the report, in a conference call with reporters. "So they are absolutely going to be more competitive." She said reform would make small businesses “more able to compete with the big boys” and "able to compete fairly on a level playing field with big businesses to attract the best workers.”

The report states that due to the current state of health care – with high broker fees, fixed administrative costs, and adverse selection for smaller businesses -- small businesses pay up to 18 percent more per worker than large firms for the same health insurance policy.

On LinkedIn right now, Romer will “pose a question” about the report to solicit questions and comments from others in a sort of comment thread. LinkedIn officials will then choose five questions to be the primary focus of an online chat with Romer on Wednesday.

“Some of these higher costs are passed on to small firm employees in the form of lower wages, and some eat into the profits of small businesses that could otherwise be used for research and development and for much-needed investments,” the report states. “This implicit tax disadvantages small firms in both the market for the best workers and the market for their products.”

Calling this “unsustainable,” President Obama in his weekly address Saturday said that because “mom and pop stores and restaurants, beauty shops and construction companies that support families and sustain communities” are “getting crushed by skyrocketing health care costs” they’re “much less likely to offer health insurance. Those that do tend to have less generous plans. In a recent survey, one third of small businesses reported cutting benefits. Many have dropped coverage altogether. And many have shed jobs, or shut their doors entirely.”

According to the Kaiser Family Foundation, the number of small businesses of 3 to 9 workers offering health insurance declined from 58 percent in 2002 to 49 percent last year.

But the leading advocacy group for small businesses, the National Federation of Independent Businesses, opposes the House Democrats health care reform legislation, which would require any company with more than $250,000 in payroll to provide insurance or face a payroll tax of at least 2%, rising to 8% for companies with more than $400,000 in payroll.

The NFIB states that the House bill “focuses solely on coverage, overlooking the dire needs of America’s small businesses to address spiraling costs and have more affordable choices in healthcare. Instead, this legislation levies new burdens during trying economic times, harmful penalties on the firms that can least afford them, and new taxes on businesses struggling to create and maintain jobs.” The NFIB also refers to a “punitive payroll tax for employers who can’t afford to offer insurance to their employees.”

Romer countered that “small businesses absolutely are being disadvantaged by the current system. The numbers are quite striking." She said that the House Democrats’ bill would allow a hypothetical firm with 8 employees that pays an average $20,000 per worker in wages and $8,000 per worker in health insurance premiums to receive a tax credit of $32,000.

And the president heralded that small businesses will be able to purchase the health insurance plan that works best for them and their employees through insurance exchanges. Those small businesses that opt to provide coverage will receive a tax credit to help pay for it.